Manchester City Should Look At Bayern Munich For How To Run A Football Club

Tonight's clash between Bayern Munich and Manchester City should be a cracker. However, off the pitch the German side are far more advanced in how a football club should be run...
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Tonight's clash between Bayern Munich and Manchester City should be a cracker. However, off the pitch the German side are far more advanced in how a football club should be run...

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Manchester City have, according to some esteemed pundits, a squad capable of rivalling that of FC Barcelona, and are many others’ bet to go all the way in the Champions League this season. They had taken maximum points in the Premier League and scored goals for fun, until last Sunday’s surprise draw away at Fulham where they led 2-0. Bayern Munich possess European pedigree in abundance and reached the final in 2010, eventually losing to Jose Mourinho’s treble-winning Inter side. This season the Bavarians have started the domestic season in imperious form, winning their last five matches without conceding a goal, while they confidently dispatched Villarreal in their opening Champions League group game. As Roberto Mancini’s assembled millions travel to Munich for matchday two of their first campaign in Europe’s elite competition for 35 years, I decided to reflect on the massive differences between how these two clubs are run.

Let’s start with Bayern. FC Bayern München are Germany’s most successful professional club. They have been Bundesliga Champions an astonishing 21 times, since it was formed in 1963, which, needless to say, is a record; they have also been German Cup winners a record 15 times; and the club has produced many of the German national team which has been so successful for, more or less, the last 50-odd years. Franz Beckenbauer, Paul Breitner, Karl-Heinz Rummenigge, Lothar Matthäus and, more recently, Bastian Schweinsteiger and Philipp Lahm, are just a few of the national team stars to have contributed to Bayern’s domestic and European success down the ages. The club has, by virtue of its historical success, accumulated a fan base which has close to 150,000 official, fee-paying members and nearly 2,500 organised fan clubs, translating to roughly 10 million supporters in Germany alone. Geography also plays its part in making FC Bayern the best-supported and richest club in Germany. Bavaria is the largest state in Germany, and FC Bayern the biggest club based in its capital, the supremely wealthy, affluent and occasionally snobbish Munich. FC Bayern are one of the world’s richest clubs, and maintain such levels of success because of its enormous turnover.

Manchester City’s tradition pales by comparison. Their FA Cup final victory against Stoke City in May ended a 35-year wait for a trophy, a period in which their fans were constantly taunted by that infamous banner at Old Trafford. Nevertheless, following their takeover by Sheik Mansour, the half-brother to the current President of the United Arab Emirates, they have just embarked upon a similar story of success. Backed by Qatari billions, they look set to sustain the success of winning last season’s FA Cup and qualifying for this season’s Champions League.

FC Bayern are one of the world’s richest clubs, and maintain such levels of success because of its enormous turnover... Manchester City’s tradition pales by comparison.

German clubs have often been considered as the template for others to follow to make a club financially secure, and Bayern are a model of financial prudency. The club’s finances are managed by its parent company FC Bayern München, the Chairman of which is former player Karr-Heinz Rummenigge, also the current European Club Association Chairman. The AG (Aktionsgesellschaft) is partly owned by the club’s two main sponsors – Adidas and Audi – while the rest is owned privately by club investors, shareholders and members. This section of the AG is FC Bayern München e. V., short for Eingetragener Verein, (‘registered club’). The club is run as a joint stock company, where the shares are not traded on  the stock exchange but owned privately by the club’s investors – in this case Adidas, Audi and the levy-paying club members.

Having shares which are privately-owned mean they are less vulnerable to takeover and speculation, and because they aren’t reliant on any one investor, Bayern Munich are far less likely to go bust than Manchester City, for example. They, by contrast, are in effect owned by the Abu Dhabi government, which subsidises their massive debts. If the Abu Dhabi government walked away tomorrow, they would leave City with massive liabilities, such as player contracts and license fees, without the requisite revenue to meet them.  They may also leave them with debts, depending on whether they have written them off or not. Utterly contrary to Bayern Munich, Man City have no solid foundations. If Sheik Mansour went bust – let’s suppose for argument’s sake that you could use water in cars and the value of oil plummeted, or he just got bored with Manchester City – then the club will go bankrupt too. The club either need to start raising their own revenue or temper their extravagant spending.

There is a ‘50+1’ rule for clubs in Germany, which says that a minimum of 51% of a club must be owned by members. Bayern have extended this considerably – minus the stocks owned by Adidas and Audi, the club is close to 85% privately-owned. Not only that, that the majority of club shareholders are fans themselves, which ensures that they have a huge say in how the club is run, and can prevent it being mismanaged. Indeed, the fact that Germany clubs charge lower ticket prices in comparison to other top European leagues, and that live league football can be viewed for free on terrestrial TV (for 2. Bundesligagames at least) can be directly attributed to fans having more of a voice. Bayern Munich has employed this strategy for years, and continues, along with every other side in the Bundesliga, to turn a profit. That is a situation that is utterly foreign to clubs in the Premier League, where several of them, not just Man City, are patronised by wealthy individuals.

It’s through this monstrous sponsorship deal that they’re hoping to raise their own revenue rather than borrowing to sustain their huge spending.

Because FCB has so many separate investors and fee-paying members, this allows them to raise sums of money that dwarf those raised by smaller Bundesliga clubs. But they are still able to comply with the German Football League’s rules on spending and debts, an issue over which Manchester City, among other clubs, have been criticised in recent years and months, and which UEFA President Michel Platini is seeking to address with the Financial Fair Play (FFP) rules, phase three of which comes into force from next season onwards. This states that clubs may only spend (on transfer fees and player wages) what they make in revenues (gate receipts, sponsorship deals and TV incomes), or less. The intent is to make sure clubs are run according to a financially sustainable business model, in other words, at a profit. FCB has been running at a profit since the early 2000s, and it’s a principle which the clubs adheres to vehemently. President Uli Hoeness recently said in a TV interview that he had no desire to win the Champions League by ‘posting a €100 million loss.’

Indeed, recently there has been some ruffling of feathers between these two sides regarding the FFP rules. Rummenigge remarked at a meeting of the European Club Association last month that a club which could comply with the new regulations, yet was still losing €120m per year, ‘had to have a trick up its sleeve.’ He was referring to Manchester City, and specifically to the sponsorship deal which the club had just made with Etihad Airlines, reportedly worth £350m over a ten-year period. Arsene Wenger and Kenny Dalglish had also expressed their suspicions that City were scheming to flout the rules and protect their financial advantage over other clubs. As such a deal falls into the category of ‘revenues raised through sponsorship deals’, the club would be able to ‘spend’ what money they make from it. Effectively, they could still offer hugely-inflated prices for players and offer them hugely-inflated wages, much like they have done in the last three seasons. It’s through this monstrous sponsorship deal that they’re hoping to raise their own revenue rather than borrowing to sustain their huge spending, which I mentioned above.

City’s other long-term plan is to eventually remove the need for buying world-class players by producing them themselves. This was seen last week with the unveiling of a new £100m project to build an academy and youth development centre – the Etihad Campus – next to the current Etihad Stadium. Yet to be approved by Manchester City Council, the complex will cater for up to 400 youth players, a smaller proportion of whom are to be schooled on site. Whatever you might think of the possibly sly way in which they plan to get around the rules on club spending, Manchester City, through this academy project, are aiming to do what Bayern Munich, and other European clubs, have managed: to school home-grown talent for the senior team and, according to football development executive Patrick Vieira, the national team. It might take ten or even twenty years before City or England begin to see the benefits of such a plan, but, as an England fan at least, I’m prepared to wait. Germany made youth academies mandatory for all Bundesliga clubs after the national team’s disastrous performance at Euro 2000, and their national team is now streets ahead of England, but that’s for another time.

So, on one hand, you have FC Bayern München, a club steeped in tradition, with, admittedly, very deep coffers, but ‘deep’ in relation to their past success. While on the other, you have a modestly-sized club, according to its tradition, but with pockets deep enough to rival and even surpass the spending power of Real Madrid and Barcelona. On the field, both teams have a superb squad of players, and will both fancy their chances of reaching the latter stages of the competition. But I know who I’ll be supporting when I take my seat at the Allianz Arena on Tuesday.

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